ROPER TECHNOLOGIES INC (ROP) FY 2024 MD&A
This page reproduces the company's own Item 7 MD&A text from the linked SEC filing. It is filer text, not grepcent analysis, scoring, or investment advice.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
All currency amounts are in millions unless specified
This item generally discusses our 2024 results compared to our 2023 results. Discussions of our 2023 results compared to our 2022 results can be found within Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023.
Overview
Roper Technologies, Inc. (“Roper,” the “Company,” “we,” “our,” or “us”) is a diversified technology company. Roper has a proven, long-term, successful track record of compounding cash flow and increasing shareholder value. We operate market leading businesses that design and develop vertical software and technology enabled products for a variety of defensible niche markets.
We pursue consistent and sustainable growth in revenue, earnings, and cash flow by enabling continuous improvement in the operating performance of our existing businesses and by acquiring businesses that offer high value-added software, services, technology-enabled products, and solutions that we believe are capable of realizing growth while maintaining high margins.
In November 2022, Roper completed the divestiture of a majority equity stake in its industrial businesses, including its entire historical Process Technologies reportable segment and the industrial businesses within its historical Measurement & Analytical Solutions reportable segment (collectively “Indicor”), to Clayton, Dubilier & Rice, LLC. Following the sale of the majority equity stake, Roper retained a minority equity interest in Indicor. See Note 10 of the Notes to Consolidated Financial Statements included in this Annual Report for additional information regarding Roper’s minority equity interest in Indicor.
During 2021, Roper entered into definitive agreements to divest its TransCore, Zetec, and CIVCO Radiotherapy businesses (“2021 Divestitures”). Roper completed the 2021 Divestitures by March 2022.
The financial results of Indicor and the 2021 Divestitures are reported as discontinued operations for all periods presented. Unless otherwise noted, discussion within Management’s Discussion and Analysis of Financial Condition and Results of Operations relates to continuing operations. Refer to Note 3 of the Notes to Consolidated Financial Statements included in this Annual Report for further information regarding discontinued operations.
Segment Reporting
Roper’s segment reporting structure is based on business model and delivery of performance obligations. The three reportable segments are as follows:
–Application Software—Aderant, Clinisys, Data Innovations, Deltek, Frontline, IntelliTrans, PowerPlan, Procare, Strata, Transact/CBORD, Vertafore
–Network Software—ConstructConnect, DAT, Foundry, iPipeline, iTradeNetwork, Loadlink, MHA, SHP, SoftWriters
–Technology Enabled Products—CIVCO Medical Solutions, FMI, Inovonics, IPA, Neptune, Northern Digital, rf IDEAS, Verathon
Financial information about our reportable segments is presented in Note 14 of the Notes to Consolidated Financial Statements included in this Annual Report.
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Application of Critical Accounting Policies
Our Consolidated Financial Statements are prepared in conformity with generally accepted accounting principles in the United States (“GAAP”). A discussion of our significant accounting policies can also be found in the Notes to Consolidated Financial Statements for the year ended December 31, 2024 included in this Annual Report.
GAAP offers acceptable alternative methods for accounting for certain issues affecting our financial results, such as determining inventory cost, depreciating long-lived assets and recognizing revenue. Other than the changes during 2023 as further described in Note 10 of our Notes to Consolidated Financial Statements with respect to the methodology used to value our equity investment in Indicor, we have not changed the application of acceptable accounting methods or the significant estimates affecting the application of these principles in the last three years in a manner that had a material effect on our Consolidated Financial Statements.
The preparation of financial statements in accordance with GAAP requires the use of estimates, assumptions, judgments, and interpretations that can affect the reported amounts of assets, liabilities, revenues and expenses, the disclosure of contingent assets and liabilities, and other supplemental disclosures.
The development of accounting estimates is the responsibility of our management. Our management discusses those areas that require significant judgments with the Audit Committee of our Board of Directors. The Audit Committee has reviewed all financial disclosures in our annual filings with the SEC. Although we believe the positions we have taken with regard to uncertainties are reasonable, others might reach different conclusions and our positions can change over time as more information becomes available. If an accounting estimate changes, its effects are accounted for prospectively or through a cumulative catch-up adjustment.
Our most significant accounting uncertainties are encountered in the areas of income taxes, valuation of other intangible assets, goodwill and other indefinite-lived intangibles impairment analyses, and valuation of our equity investment in Indicor. Estimates are considered to be significant if they meet both of the following criteria: (1) the estimate requires assumptions about matters that are uncertain at the time the estimate is made, and (2) changes in the estimate are reasonably likely to have a material financial impact from period-to-period.
Income taxes can be affected by estimates of whether and within which jurisdictions future earnings will occur and if, how, and when cash is repatriated to the U.S., combined with other aspects of an overall income tax strategy. Additionally, taxing jurisdictions could retroactively disagree with our tax treatment of certain items, and some historical transactions have income tax effects going forward. Accounting rules require these future effects to be evaluated using current laws, rules and regulations, each of which can change at any time and in an unpredictable manner. If there is a material change in the actual effective tax rates, the time period within which the underlying temporary differences become taxable or deductible, or if the tax law changes are unfavorable, there could be a resulting increase to income tax expense and the effective tax rate.
Our 2024 effective income tax rate was 21.2% and our 2023 effective income tax rate was 21.5%. We expect the effective tax rate for 2025 to be approximately 21% to 22%.
We account for goodwill in a purchase business combination as the excess purchase price over the fair value of the net identifiable assets acquired. Goodwill, which is not amortized, is tested for impairment on an annual basis in conjunction with our annual forecast process during the fourth quarter (or an interim basis if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value).
When testing goodwill for impairment, we have the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the estimated fair value of a reporting unit is less than its carrying amount. If we elect to perform a qualitative assessment and determine that an impairment is more likely than not, we are then required to perform the quantitative impairment test; otherwise, no further analysis is required. Under the qualitative assessment, we consider various qualitative factors, including macroeconomic conditions, relevant industry and market trends, cost factors, overall financial performance, other entity-specific events, and events affecting the reporting unit that could indicate a potential change in the fair value of our reporting unit or the composition of its carrying value. We also consider the specific future outlook for the reporting unit.
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We also may elect not to perform the qualitative assessment and, instead, proceed directly to the quantitative impairment test. The quantitative assessment utilizes the equal weighting of both an income approach (discounted cash flow) and a market approach (consisting of a comparable public company earnings multiples methodology) to estimate the fair value of a reporting unit. To determine the reasonableness of the estimated fair values, we review the assumptions to ensure that neither the income approach nor the market approach provides significantly different valuations. If the estimated fair value exceeds the carrying value, no further work is required and no impairment loss is recognized. If the carrying value exceeds the estimated fair value, a non-cash impairment loss is recognized in the amount of that excess.
Key assumptions used in the income and market approaches are updated when the analysis is performed for each reporting unit. The assumptions that have the most significant effect on the fair value calculations are the projected revenue growth rates, future operating margins, discount rates, terminal values, and earnings multiples. While we use reasonable and timely information to prepare our cash flow and discount rate assumptions, actual future cash flows or market conditions could differ significantly and could result in future non-cash impairment charges related to recorded goodwill balances.
Recently acquired reporting units generally represent a higher inherent risk of impairment, which typically decreases as the businesses are integrated into our enterprise. Negative industry or economic trends, disruptions to our business, actual results significantly below projections, unexpected significant changes or planned changes in the use of the assets, divestitures, and market capitalization declines may have a negative effect on the fair value of our reporting units.
As of the annual impairment test, Roper has 23 reporting units with individual goodwill amounts ranging from $17.5 to $3,363.7. In 2024, the Company performed its annual impairment test in the fourth quarter for all reporting units. The Company conducted its analysis qualitatively and assessed whether it was more likely than not that the respective fair values of these reporting units were less than their carrying amounts. The Company determined that impairment of goodwill was not likely in any of its reporting units and thus was not required to perform a quantitative assessment for these reporting units as of October 1, 2024.
Trade names that are determined to have an indefinite useful economic life are not amortized, but separately tested for impairment during the fourth quarter of the fiscal year or on an interim basis if an event occurs that indicates the fair value is more likely than not below the carrying value. We first qualitatively assess whether the existence of events or circumstances leads to a determination that it is more likely than not that the estimated fair value of the indefinite-lived trade name is less than its carrying amount. If necessary, we conduct a quantitative assessment using the relief-from-royalty method, which we believe to be an acceptable methodology due to its common use by valuation specialists in determining the fair value of intangible assets. This methodology assumes that, in lieu of ownership, a third party would be willing to pay a royalty in order to exploit the related benefits of these assets. The assumptions that have the most significant effect on the fair value calculations are the royalty rates, projected revenue growth rates, discount rates, and terminal values. Each royalty rate is determined based on the profitability of the trade name to which it relates and observed market royalty rates. Revenue growth rates are determined after considering current and future economic conditions, recent sales trends, discussions with customers, planned timing of new product launches, or other variables. Trade names resulting from recent acquisitions generally represent the highest risk of impairment, which typically decreases as the businesses are integrated into our enterprise.
The assessment of fair value for impairment purposes requires significant judgments to be made by management. Although our forecasts are based on assumptions that are considered reasonable by management and consistent with the plans and estimates management uses to operate the underlying businesses, there is significant judgment applied in determining the expected results attributable to the businesses and/or reporting units. Changes in estimates or the application of alternative assumptions could produce significantly different results.
The most significant identifiable intangible assets with definite useful economic lives recognized from our acquisitions are customer relationships. The fair value for customer relationships is determined as of the acquisition date using the excess earnings method. Under this methodology the fair value is determined based on the estimated future after-tax cash flows arising from the acquired customer relationships over their estimated useful lives after considering customer attrition and contributory asset charges. The assumptions that have the most significant effect on the fair value calculations are the customer attrition rates, projected customer revenue growth rates, margins, contributory asset charges, and discount rates. When testing customer relationship intangible assets for potential impairment, management considers historical customer attrition rates and projected revenues and profitability related to customers that existed at acquisition. In evaluating the amortizable life for customer relationship intangible assets, management considers historical customer attrition patterns.
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We evaluate whether there has been an impairment of identifiable intangible assets with definite useful economic lives, or of the remaining life of such assets, when certain indicators of impairment are present. In the event that facts and circumstances indicate that the cost or remaining period of amortization of any asset may be impaired, an evaluation of recoverability would be performed. If an evaluation is required, the estimated future gross, undiscounted cash flows associated with the asset would be compared to the asset’s carrying amount to determine if a write-down to fair value or a revision in the remaining amortization period is required.
As of December 31, 2024 and 2023, Roper held a 45.5% and 47.3% minority equity interest in Indicor Equity, LLC, respectively. This equity interest provides us with the ability to exercise significant influence, but not control, over the investee. We elected to apply the fair value option as we believe this is the most reasonable method to value this equity investment. This investment is classified within Level 3 of the fair value hierarchy as valuation of the investment reflects management’s estimate of assumptions that market participants would use in pricing the equity interest. Any changes to the valuation estimates or assumptions, as described further in Note 10 of the Notes to Consolidated Financial Statements included in this Annual Report, could produce significantly different results. The fair value of our equity investment in Indicor is estimated on a quarterly basis and the change in fair value is reported as a component of “Equity investments gain, net” in our Consolidated Statements of Earnings.
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Results of Continuing Operations
All currency amounts are in millions unless specified, percentages are of net revenues
Percentages may not sum due to rounding.
The following table sets forth selected information for the years indicated:
| Year ended December 31, | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 2024 | 2023 | 2022 | ||||||||
| Net revenues: | ||||||||||
| Application Software (1) | $ | 3,868.3 | $ | 3,186.9 | $ | 2,639.5 | ||||
| Network Software (2) | 1,475.6 | 1,439.4 | 1,378.5 | |||||||
| Technology Enabled Products | 1,695.3 | 1,551.5 | 1,353.8 | |||||||
| Total consolidated | $ | 7,039.2 | $ | 6,177.8 | $ | 5,371.8 | ||||
| Gross margin: | ||||||||||
| Application Software | 68.4 | % | 68.9 | % | 68.8 | % | ||||
| Network Software | 85.0 | % | 85.1 | % | 84.6 | % | ||||
| Technology Enabled Products | 57.6 | % | 57.1 | % | 56.9 | % | ||||
| Total consolidated | 69.3 | % | 69.7 | % | 69.9 | % | ||||
| Selling, general and administrative expenses: | ||||||||||
| Application Software | (42.0) | % | (43.1) | % | (41.8) | % | ||||
| Network Software | (39.9) | % | (41.2) | % | (43.2) | % | ||||
| Technology Enabled Products | (23.7) | % | (23.7) | % | (23.8) | % | ||||
| Total consolidated | (37.1) | % | (37.8) | % | (37.6) | % | ||||
| Segment operating margin: | ||||||||||
| Application Software | 26.5 | % | 25.8 | % | 27.1 | % | ||||
| Network Software | 45.2 | % | 43.9 | % | 41.4 | % | ||||
| Technology Enabled Products | 33.9 | % | 33.4 | % | 33.2 | % | ||||
| Total consolidated | 32.2 | % | 31.9 | % | 32.3 | % | ||||
| Corporate administrative expenses (3) | (3.8) | % | (3.7) | % | (3.9) | % | ||||
| Income from operations | 28.4 | 28.2 | 28.4 | |||||||
| Interest expense, net | (3.7) | (2.7) | (3.6) | |||||||
| Equity investments gain, net | 3.3 | 2.7 | — | |||||||
| Other expense, net | (0.1) | — | (0.9) | |||||||
| Earnings before income taxes | 27.9 | 28.2 | 23.9 | |||||||
| Income taxes | (5.9) | (6.1) | (5.5) | |||||||
| Net earnings from continuing operations | 22.0 | % | 22.2 | % | 18.3 | % |
(1)Includes results from the acquisitions of Horizon Lab Systems, LLC from January 3, 2022, Common Cents Systems, Inc. from April 6, 2022, MGA Systems Holdings, Inc. from June 27, 2022, Common Sense Solutions, Inc. from July 12, 2022, viDesktop Inc. from August 19, 2022, TIP Technologies, Inc. from September 23, 2022, Frontline from October 4, 2022, Promium, L.L.C. from May 2, 2023, Syntellis from August 7, 2023, Replicon Inc. from August 21, 2023, ProPricer from December 26, 2023, Procare from February 26, 2024, Transact from August 20, 2024, and Surefyre, Inc. from November 4, 2024.
(2)Includes results from the acquisition of Trucker Tools, LLC from December 17, 2024.
(3)Includes unallocated corporate general and administrative expenses and enterprise-wide stock-based compensation.
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Year Ended December 31, 2024 compared to the Year Ended December 31, 2023
Net revenues for the year ended December 31, 2024 were $7,039.2 as compared to $6,177.8 for the year ended December 31, 2023, an increase of 13.9%. The components of revenue growth for the year ended December 31, 2024 were as follows:
| Application Software | Network Software | Technology Enabled Products | Roper | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Total Revenue Growth | 21.4 | % | 2.5 | % | 9.3 | % | 13.9 | % | |||||
| Less Impact of: | |||||||||||||
| Acquisitions | 15.7 | — | — | 8.1 | |||||||||
| Foreign Exchange | 0.1 | — | — | — | |||||||||
| Organic Revenue Growth | 5.6 | % | 2.5 | % | 9.3 | % | 5.8 | % |
In our Application Software segment, net revenues for the year ended December 31, 2024 were $3,868.3 as compared to $3,186.9 for the year ended December 31, 2023. The growth of 5.6% in organic revenues was broad-based across the segment led by our businesses serving the project-based business/government contracting, acute healthcare, property and casualty insurance, and legal markets. Gross margin decreased to 68.4% for the year ended December 31, 2024 as compared to 68.9% for the year ended December 31, 2023, due primarily to a lower gross margin profile associated with the higher payments revenue mix at Procare and Transact, our 2024 acquisitions, whose results reduced gross margin by 180 basis points. This decrease was partially offset by improved leverage on higher organic revenues. Selling, general and administrative (“SG&A”) expenses as a percentage of net revenues decreased to 42.0% in the year ended December 31, 2024 as compared to 43.1% in the year ended December 31, 2023, due primarily to lower SG&A profiles at Procare and Transact, which collectively reduced SG&A as a percentage of net revenues by 70 basis points, operating leverage on higher organic revenues, and cost synergies resulting from the integration of Syntellis. The resulting operating margin was 26.5% in the year ended December 31, 2024 as compared to 25.8% in the year ended December 31, 2023.
In our Network Software segment, net revenues were $1,475.6 for the year ended December 31, 2024 as compared to $1,439.4 for the year ended December 31, 2023. The growth of 2.5% in organic revenues was led by our network software businesses serving the alternate site healthcare, life insurance/annuities, and construction markets, partially offset by a decline in our businesses serving the media and entertainment and freight match markets primarily related to end market conditions. Gross margin remained relatively consistent at 85.0% for the year ended December 31, 2024 as compared to 85.1% for the year ended December 31, 2023. SG&A expenses as a percentage of net revenues decreased to 39.9% in the year ended December 31, 2024, as compared to 41.2% in the year ended December 31, 2023, due primarily to expense reductions resulting from cost structure rationalization at our businesses serving the freight match market and operating leverage on higher organic revenues. The resulting operating margin was 45.2% in the year ended December 31, 2024 as compared to 43.9% in the year ended December 31, 2023.
In our Technology Enabled Products segment, net revenues were $1,695.3 for the year ended December 31, 2024 as compared to $1,551.5 for the year ended December 31, 2023. The growth of 9.3% in organic revenues was led by our medical products businesses, excluding our precision measurement business, and growth in our water meter technology business. These increases were partially offset primarily by a decline in our access management businesses. Gross margin increased to 57.6% for the year ended December 31, 2024 as compared to 57.1% for the year ended December 31, 2023, due primarily to improved leverage on higher organic revenues and revenue mix. SG&A expenses as a percentage of net revenues remained consistent at 23.7% in both the years ending December 31, 2024 and 2023. The resulting operating margin was 33.9% in the year ended December 31, 2024 as compared to 33.4% in the year ended December 31, 2023.
Corporate expenses increased by $40.7 to $267.4, or 3.8% of net revenues, in 2024 as compared to $226.7, or 3.7% of net revenues, in 2023. The dollar increase was due primarily to higher stock-based compensation expense as well as expense associated with settled litigation.
Interest expense, net, increased by $94.5, or a 57.4% increase, to $259.2 for the year ended December 31, 2024 as compared to $164.7 for the year ended December 31, 2023. The increase was due primarily to higher weighted average debt balances and less interest income earned on our cash and cash equivalents.
Equity investments gain, net, was $234.6 for the year ended December 31, 2024 due primarily to a $135.6 gain on the sale of our equity investment in Certinia, a $96.4 increase in the fair value of our equity investment in Indicor, and $10.8 of dividend
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distributions received from Indicor, partially offset by our proportionate share of net loss associated with the investment in Certinia of $9.8 in accordance with the equity method of accounting. Equity investments gain, net, was $165.4 for the year ended December 31, 2023 due primarily to a $140.9 increase in the fair value of our equity investment in Indicor and $32.5 of dividend distributions received from Indicor, partially offset by our proportionate share of net loss associated with the investment in Certinia of $5.2.
Other expense, net, of $5.0 for the year ended December 31, 2024 was composed primarily of foreign exchange losses at our non-U.S. based subsidiaries. Other expense, net, of $2.8 for the year ended December 31, 2023 was composed primarily of foreign exchanges losses at our non-U.S. based subsidiaries, partially offset by a gain on the sale of non-operating assets.
Our 2024 effective income tax rate of 21.2% decreased as compared to our 2023 tax rate of 21.5%, due primarily to the release of valuation allowances, partially offset by a reduction in stock-based compensation tax benefits.
Backlog is equal to our remaining performance obligations expected to be recognized as revenue within the next 12 months as discussed within Note 1 of the Notes to Consolidated Financial Statements. Backlog decreased 1.6% to $3,105.4 at December 31, 2024 as compared to $3,156.6 at December 31, 2023 due primarily to a decrease in our Technology Enabled Products segment associated with the normalization of supply chain ordering patterns, partially offset by acquisitions and organic growth in our Application Software segment.
| Backlog as of December 31, | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 2024 | 2023 | Change | ||||||||
| Application Software | $ | 2,274.6 | $ | 2,136.1 | 6.5 | % | ||||
| Network Software | 515.8 | 493.6 | 4.5 | % | ||||||
| Technology Enabled Products | 315.0 | 526.9 | (40.2) | % | ||||||
| Total | $ | 3,105.4 | $ | 3,156.6 | (1.6) | % |
Financial Condition, Liquidity, and Capital Resources
All currency amounts are in millions unless specified
Selected cash flows for the years ended December 31, 2024 and 2023 were as follows:
| 2024 | 2023 | |||||
|---|---|---|---|---|---|---|
| Cash provided by (used in) continuing operations from: | ||||||
| Operating activities | $ | 2,393.2 | $ | 2,037.4 | ||
| Investing activities | $ | (3,468.5) | $ | (2,128.3) | ||
| Financing activities | $ | 1,069.5 | $ | (499.5) |
Operating activities – Net cash provided by operating activities from continuing operations increased by 17% to $2,393.2 in 2024 as compared to $2,037.4 in 2023 due primarily to higher net earnings from continuing operations net of non-cash expenses, increased collections on accounts receivable, the absence of the cash payment from the prior year of $45.0 related to the settlement of a patent litigation matter, and timing associated with interest payments on our senior notes issued in 2024, partially offset by higher cash taxes paid.
Investing activities – Cash used in investing activities from continuing operations during 2024 was primarily for business acquisitions, most notably Procare and Transact, partially offset by proceeds from the sale of our equity investment in Certinia. Cash used in investing activities from continuing operations during 2023 was primarily for business acquisitions, most notably Syntellis and Replicon.
Financing activities – Cash provided by financing activities from continuing operations during 2024 was primarily from the issuance of $2,000.0 of senior notes and net proceeds from stock-based compensation, partially offset by $500.0 of senior notes repaid at maturity, dividend payments, and $235.0 of net repayments on our unsecured revolving credit facility. Cash used in financing activities from continuing operations during 2023 was primarily for $700.0 of senior notes repaid at maturity as well as dividend payments, partially offset by net borrowings of $360.0 under our unsecured revolving credit facility and net proceeds from stock-based compensation.
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Net working capital (total current assets, excluding cash, less total current liabilities, excluding debt) was negative $1,434.6 at December 31, 2024 as compared to negative $1,196.6 at December 31, 2023, due primarily to increased deferred revenue as well as increases in accrued liabilities driven by accrued compensation and interest, partially offset by an increase in accounts receivable. Consistent negative net working capital demonstrates Roper’s continued focus on asset-light business models.
Total debt excluding unamortized debt issuance costs was $7,669.2 at December 31, 2024 (28.9% of total capital) as compared to $6,360.2 at December 31, 2023 (26.7% of total capital). Our total debt increased at December 31, 2024 as compared to December 31, 2023 due primarily to the issuance of $2,000.0 of senior notes, partially offset by $500.0 of senior notes repaid at maturity and $235.0 of net repayments on our unsecured revolving credit facility. The net proceeds from the issuance of senior notes were used to repay a portion of the borrowings outstanding under our unsecured credit facility, including borrowings incurred to fund the purchase price of the Transact acquisition, as well as to repay a portion of the senior notes due September 15, 2024. The remaining portion of senior notes due September 15, 2024 were repaid using borrowings under our unsecured credit facility.
On July 21, 2022, we entered into a five-year unsecured credit facility (the “Credit Agreement”) among Roper, the financial institutions from time to time party thereto, JPMorgan Chase Bank, N.A., as administrative agent, Bank of America, N.A. and Wells Fargo Bank, N.A., as syndication agents, and Mizuho Bank, Ltd., MUFG Bank, Ltd., PNC Bank, National Association, TD Bank, N.A., Truist Bank, and U.S. Bank, National Association, as documentation agents, which replaced the previous $3,000.0 unsecured credit facility, dated as of September 2, 2020, as amended. The Credit Agreement comprises a five-year $3,500.0 revolving credit facility, which includes availability of up to $150.0 for letters of credit. We may also, subject to compliance with specified conditions, request additional term loans or revolving credit commitments in an aggregate amount not to exceed $500.0.
The Credit Agreement requires Roper to maintain a Total Debt to Total Capital Ratio (as defined in the Credit Agreement) of 0.65 to 1.00, or less. Borrowings under the Credit Agreement are prepayable at Roper’s option at any time in whole or in part without premium or penalty.
We were in compliance with all debt covenants related to our unsecured credit facility throughout the years ended December 31, 2024 and 2023.
At December 31, 2024, we had $7,500.0 of senior unsecured notes, $125.0 of borrowings outstanding under our unsecured revolving credit facility and $6.8 of outstanding letters of credit at December 31, 2024, of which, $6.0 was covered by our lending group thereby reducing our revolving credit capacity commensurately. At December 31, 2024, we also had $44.2 of other debt in the form of short-term borrowings and finance leases.
We may redeem some or all of each outstanding series of senior notes at any time or from time to time, at 100% of their principal amount, plus a make-whole premium based on a spread to U.S. Treasury securities.
See Note 9 of the Notes to Consolidated Financial Statements included in this Annual Report for additional information regarding our debt.
Cash and cash equivalents held at our foreign subsidiaries totaled $130.8 at December 31, 2024 as compared to $148.3 at December 31, 2023, a decrease of 11.8%. The decrease was primarily due to cash repatriation of $270.9, partially offset by cash generated at our foreign subsidiaries. We intend to repatriate substantially all historical and future earnings.
Capital expenditures were $66.0 and $68.0 during 2024 and 2023, respectively. Capitalized software expenditures were $45.0 and $40.0 during 2024 and 2023, respectively. Capital expenditures and capitalized software expenditures were relatively consistent as a percentage of annual net revenues in 2024 as compared to 2023. In the future, we expect the aggregate of capital expenditures and capitalized software expenditures as a percentage of annual net revenues to be between 1.0% and 1.5%.
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Material Contractual Cash Obligations
All currency amounts are in millions
The following table quantifies our material contractual cash obligations at December 31, 2024:
| Material contractual cash obligations 1 | Payments due in fiscal year | |||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Total | 2025 | 2026 | 2027 | 2028 | 2029 | Thereafter | ||||||||||||||||||||
| Total debt | $ | 7,669.2 | $ | 1,044.1 | $ | 700.1 | $ | 825.0 | $ | 800.0 | $ | 1,200.0 | $ | 3,100.0 | ||||||||||||
| Senior note interest | 1,315.6 | 244.3 | 215.4 | 188.8 | 179.0 | 145.4 | 342.7 | |||||||||||||||||||
| Operating leases | 221.9 | 51.7 | 43.6 | 36.5 | 28.7 | 20.3 | 41.1 | |||||||||||||||||||
| Purchase obligations 2 | 1,252.2 | 582.2 | 215.4 | 159.1 | 148.9 | 137.7 | 8.9 | |||||||||||||||||||
| Total | $ | 10,458.9 | $ | 1,922.3 | $ | 1,174.5 | $ | 1,209.4 | $ | 1,156.6 | $ | 1,503.4 | $ | 3,492.7 |
1 We have excluded the liability for uncertain tax positions and certain other tax liabilities as we are not able to reasonably estimate the timing of the payments. See Note 8 of the Notes to Consolidated Financial Statements included in this Annual Report.
2 Represents minimum fixed price purchase commitments that are legally binding across Roper.
We believe that internally generated cash flows and the remaining availability under our unsecured credit facility will be adequate to finance our normal operating requirements. Although we maintain an active acquisition program, any future acquisitions will be dependent on numerous factors and it is not feasible to reasonably estimate if or when any such acquisitions will occur and what the impact will be on our business, financial condition, and results of operations. Such acquisitions may be financed by the use of existing credit lines, future cash flows from operations, future divestitures, the proceeds from the issuance of new debt or equity securities, or any combination of these methods, the terms and availability of which will be subject to market and economic conditions generally.
We anticipate that our businesses will generate positive cash flows from operating activities, and that these cash flows will permit the reduction of currently outstanding debt in accordance with the repayment schedule. However, the rate at which we can reduce our debt during 2025 (and reduce the associated interest expense) will be affected by, among other things, the financing and operating requirements of any new acquisitions, the financial performance of our existing companies, the impact of geopolitical and economic uncertainties, and the financial markets generally. None of these factors can be predicted with certainty.
Recently Issued Accounting Standards
See Note 1 of the Notes to Consolidated Financial Statements included in this Annual Report for information regarding the effect of new accounting pronouncements on our Consolidated Financial Statements.
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